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Yes, your approach is valid and makes sense. Here’s why using full data for ranking in Portfolio Master while focusing on good OOS performance during strategy selection is a balanced approach:

Why Rank with Full Data:

• Comprehensive Performance Overview: Using full data (both IS and OOS combined) for ranking gives you an overall picture of how the strategy performs across all available data. This helps to ensure that the strategy isn’t just optimized for a specific period.
• Balanced Metrics: Full data ranking helps capture metrics like profit factor, Sharpe ratio, and drawdown across the entire testing period, giving a more balanced evaluation of performance.
• Portfolio Cohesion: Using full data provides a consistent basis for ranking strategies, which helps build a well-rounded portfolio.

Focusing on Good OOS Performance:

• Robustness Check: Emphasizing good OOS performance ensures that the strategy has not been overfitted to the IS data and can perform well in unseen market conditions. This is crucial for assessing how the strategy is likely to behave in live trading.
• Validation of Stability: OOS performance indicates the adaptability and stability of a strategy when exposed to new data. It acts as a test for the real-world viability of the strategy.
• Reducing Overfitting Risk: Strategies that excel only in IS data may not perform well in live markets. By focusing on OOS, you’re filtering out those that might be overfitted and selecting those that are more robust.

Recommended Approach:

1. Rank Using Full Data:
   • Rank strategies based on key metrics like Profit Factor, Sharpe Ratio, Ret/DD Ratio, etc., using the complete dataset.
   • This gives you a holistic view and helps identify strategies that perform well consistently across the entire backtest.
2. Select Strategies with Strong OOS Performance:
   • After ranking, review the OOS performance of the top strategies to ensure they meet your criteria for robustness.
   • Prioritize strategies that maintain good metrics in the OOS period, such as reasonable drawdown, high Sharpe ratio, and stability.
   • Ensure that OOS results are consistent with the performance indicated by the full data to avoid surprises during live trading.

Conclusion:

Your approach of ranking with full data for an overall view, while focusing on good OOS performance during the final selection, is an effective method. It strikes a balance between comprehensive evaluation and ensuring real-world applicability. This process helps build a portfolio that is both diversified and resilient, minimizing the risks associated with overfitting and improving the likelihood of successful live trading performance.

In trading, caution and strategy go hand in hand. One of the most effective ways to manage risk while maximizing potential gains is by opening small initial positions and gradually building on them. This approach, often referred to as the pyramid principle, allows you to confirm the validity of your trading decision before committing more capital.

Davy Crockett’s famous words, “Make sure you’re right and go!” perfectly capture the essence of this rule. Begin by testing the waters with a modest position, ensuring the trade aligns with your analysis and expectations. If the market validates your decision—whether through favorable price movements, trend continuation, or technical confirmations—you can then strategically add to your position.

Adding to a trade isn’t about doubling down recklessly; it’s about scaling up methodically. Use well-defined rules for pyramiding, such as adding a fixed percentage of your original position or placing additional trades at key breakout levels or support/resistance points. This approach helps you compound your gains while maintaining control over risk.

The pyramid principle also serves as a safeguard against premature or emotional decisions. Starting small minimizes potential losses if the trade doesn’t go as planned, allowing you to reassess and adjust without significant damage to your portfolio.

Equally important is knowing when *not* to add to a position. If market conditions shift or your trade starts to falter, resist the temptation to “average down” or chase losses. Instead, focus on preserving capital and preparing for better opportunities.

In essence, this rule emphasizes patience, precision, and strategic growth. By starting small, confirming your analysis, and adding to winning positions strategically, you can maximize your returns while maintaining a disciplined and risk-conscious approach. Trading isn’t just about being right; it’s about ensuring your capital is deployed effectively when you are.

In the world of trading, success often hinges on discipline and patience. As the renowned trader Bill Lipschutz wisely observed, out of 250 trades, you may lose on three, achieve significant profits on two, and the rest will depend entirely on your ability to execute with consistency and control. The key lies in waiting for the right moment and acting decisively when conditions align in your favor.

Discipline in trading means adhering to your strategy and resisting the urge to act impulsively. Markets often tempt traders to jump in prematurely or hold positions too long, driven by fear or greed. True discipline, however, involves waiting for compound trends—situations where strong stocks align with strong sectors or groups, backed by favorable market conditions. These moments, where multiple support and resistance levels converge in your favor, offer the highest probability of success.

Patience complements discipline by teaching traders to embrace the waiting game. Trading isn’t about constant action; it’s a business where much of your time is spent observing, analyzing, and preparing. This waiting period is far from wasted—it’s an opportunity to sharpen your strategies, refine your understanding of market dynamics, and ensure you’re ready to act when the conditions are just right.

Successful traders understand the power of doing nothing during uncertain times. Rushing into trades without clear signals often leads to unnecessary losses. By focusing on high-probability setups and waiting for the perfect alignment of factors, you improve your chances of capturing meaningful trends while avoiding low-quality opportunities.

Tracking compound trends and understanding how various factors interact—like the strength of a stock relative to its sector or the overall market—provides you with a broader perspective. This approach allows you to identify setups where the odds are stacked in your favor, minimizing risk and maximizing reward.

In essence, trading success requires a blend of discipline, patience, and strategic insight. Learn to wait for the right moment, act with precision, and accept that sometimes the best move is no move at all. Remember, the markets reward those who plan their actions carefully and remain steadfast in their approach, even when doing so feels counterintuitive.